An Audit Report on Hurricane Recovery Funds Administered by the Department of Housing and Community Affairs and the Office of Rural Community Affairs
October 2007
Report Number 08-005
Overall Conclusion
Two state agencies--the Department of Housing and Community Affairs and the Office of Rural Community Affairs--are responsible for administering $523,669,701 in funds dedicated to the recovery from Hurricane Katrina and Hurricane Rita. Ninety-six percent of these funds were made available through two federal grants from the U.S. Department of Housing and Urban Development.
A summary of each agency's status in awarding these funds is presented below.
Status of Funds Allocated to Unmet Housing Needs and Administered by the Department of Housing and Community Affairs
The Department of Housing and Community Affairs has expended only $1,102,249 (2.59 percent) of the $42,589,054 in Community Development Block Grant funds the federal government initially awarded to it in May 2006 for hurricane recovery. Of the amount expended, $231,066 (21 percent) has been used by the Department of Housing and Community Affairs for administrative expenses. As of September 14, 2007, only 13 applicants had benefited from a delivered product; all 13 applicants received manufactured homes.
The Department of Housing and Community Affairs was awarded additional Community Development Block Grant funds totaling $386,671,849 in April 2007. However, it cannot spend those funds until the necessary contractual agreements are in place to administer the award.
The Department of Housing and Community Affairs also is responsible for administering an additional $19,624,852 in non-Community Development Block Grant funds dedicated to hurricane recovery through its existing programs.
The Department of Housing and Community Affairs has generally awarded funds for hurricane recovery in accordance with award criteria and requirements. However, auditors identified certain deficiencies related to the administration of these funds that the Department of Housing and Community Affairs should correct.
The Department of Housing and Community Affairs contracted with councils of governments to conduct a community development program for emergency relief in the Hurricane Rita disaster area, which included determining the eligibility of applicants for Community Development Block Grant hurricane recovery funds. The combined efforts of the Department of Housing and Community Affairs and the councils of governments have not moved applicants through the eligibility determination process within a reasonable time. Auditors reviewed 3,814 (89 percent) of the 4,299 applications for the Department of Housing and Community Affairs' initial Community Development Block Grant funds. Approximately 44 percent of the applications reviewed were submitted before July 2006; approximately 85 percent of the 3,814 applications reviewed were submitted before February 2007. Many applicants are still living in some of the 4,249 trailers that the Federal Emergency Management Agency (FEMA) issued to Texas residents following Hurricane Rita.
Auditors also identified another less significant issue that was communicated separately in writing to the Department of Housing and Community Affairs.
Status of Funds Allocated to Infrastructure Needs and Administered by the Office of Rural Community Affairs
The Office of Rural Community Affairs was initially allocated $31,933,946 in non-housing federal Community Development Block Grant funds for hurricane recovery. Approximately 46 percent of the non-housing subrecipient contracts the Office of Rural Community Affairs awarded to communities were originally intended to fulfill a 25 percent match for funds awarded by FEMA for hurricane-related public assistance expenses incurred by cities and counties. However, FEMA later determined it would fund 100 percent of these costs for public assistance projects; hazard mitigation project matching requirements remained unchanged.
The Office of Rural Community Affairs is now working with subrecipients to find other qualifying projects for its Community Development Block Grant funds. In many cases, the funds are now going toward projects that involve the purchase of generators for pump stations and shelter improvements. While only $4,886,128 (15.3 percent) percent of the initial $31,933,946 in Community Development Block Grant funding has been expended, it is important to note that the costs required to satisfy the most urgent infrastructure needs within communities have already been incurred by the communities and, in many cases, reimbursed by FEMA. The funds expended have been used to purchase emergency generators and sewer facilities; remove debris; repair streets, water wells, water lines, drainage systems, fire stations, water towers, and lift stations; restore and repair electrical systems; acquire and remove damaged structures; regrade roads and ditches; and replace culverts.
The Office of Rural Community Affairs was allocated additional Community Development Block Grant funds totaling $42,000,000 in April 2007 to restore critical infrastructure. As required by an action plan approved by the federal government, $19,800,000 of these funds are reserved for three projects, and the Office of Rural Community Affairs will award the remaining $22,200,000 through a competitive selection process. The Office of Rural Community Affairs has not yet expended any of these funds.
The Office of Rural Community Affairs is responsible for administering an additional $850,000 in non-Community Development Block Grant funds dedicated to hurricane recovery efforts through its existing programs. Auditors identified deficiencies related to the administration of these funds; however, the Office of Rural Community Affairs generally awarded funds for hurricane recovery in accordance with award criteria and requirements.
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